Background: PD-1 blocking antibodies have significant efficacy in the treatment of melanoma; however, many patients fail to respond and resistance mechanisms remain unknown. We addressed the role of T_regs, an immunosuppressive T-cell population, in patient outcome after treatment with nivolumab. Methods: Peripheral blood mononuclear cells (PBMC) were obtained from patients on trials with nivolumab as adjuvant therapy for resected disease or as treatment for metastatic melanoma. To measure suppression, T_regs were flow-sorted from PBMC and evaluated in allogeneic mixed lymphocyte reactions. T_regs and conventional CD4 T-cells were evaluated for gene expression changes by RNA-sequencing. T_reg percentages and phosphorylated STAT3 (pSTAT3) expression were evaluated by flow cytometry. The effects of PD-1 blockade with nivolumab were evaluated in vitro using T-cells from baseline patient PBMC samples. Results: T_regs from responding patients or adjuvant patients without evidence of disease (NED) had reduced suppressive function post-nivolumab (p < 0.05), but no changes were observed in relapsing/non-responding patients; their T_regs were more suppressive than NED/responding T_regs (p < 0.001). NED T_regs had unique gene expression changes and associated pathways post-nivolumab compared to relapsing patient T_regs and conventional CD4 T-cells, including up-regulation of proliferation pathways (q < 8e-19) and downregulation of oxidative phosphorylation (q < 7e-5). NED T_regs had upregulation of pSTAT3 expression post-nivolumab (p < 0.05), which was not observed in relapsing patients. Evaluation of T_regs from patients with active disease also showed upregulation of pSTAT3 in responders (p < 0.05) but not non-responders. The relative increase in T_reg pSTAT3 was associated with increased overall survival (R²= 0.49, p < 0.05). In vitro assays using PD-1 blocking antibodies recapitulated the increase in pSTAT3 (p < 0.05) and T_reg percentages (p < 0.001), which were diminished with the addition of a STAT3 inhibitor (p < 0.01). Conclusions: These results demonstrate previously unknown roles of decreased T_reg suppressive function and induction of STAT3 as biomarkers of patient’s outcome to nivolumab therapy.